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Wednesday, November 21, 2018

The New York Hustle of Amazon’s Second Headquarters

The city of hustlers got hustled.
Jeff Bezos, the founder of Amazon and the world’s richest man, is
wealthy enough to write a ten-thousand-dollar check to every apartment
nabber, Wall Street shouter, what-time-is-it-showtime subway dancer,
part-time-student pension chaser, asylum-seeking stage actor,
author-cum-barista, wrong-way delivery guy, business-call-conducting
taxi driver—to each of the more than eight million people currently
living in New York City. This week, though, when Bezos bestowed upon the
city the dubious honor of becoming Amazon’s second “headquarters”—an
honor it shares with two other cities, including its existing
headquarters, in Seattle—it was New Yorkers who paid him. The city and
state offered Amazon at least 1.5 billion dollars in tax breaks and
other grants to settle in a place that has not, historically, struggled
to attract newcomers. (“I really think this could be the thing that
finally puts New York on the map,” James Corden joked.)
When combined with existing incentives, Amazon might receive three
billion dollars in breaks in New York alone, the equivalent of every
city resident Venmoing $348 to Bezos.
Throughout a bidding process
that saw dozens of cities vie to be the next location of a proposed
hydra-headquarters, there were murmurs that Amazon might really just be
looking for a regular office, and rebranding it a “headquarters” to
corner those tax breaks. Those suspicions seemed validated when Amazon
announced this week that its second headquarters would actually be two
additional headquarters, one in Queens and one in Northern Virginia.
(The company also announced plans to build a new Operations Center of
Excellence in Nashville, which would employ five thousand people.)

In
New York, the 1.2-billion-dollar tax break is based on Amazon’s
commitment to generate twenty-five-thousand jobs, at an average annual
salary of more than a hundred and fifty thousand dollars, which would
net the company a forty-eight-thousand-dollar tax credit per job
created. As part of a scheme called PILOT, which
stands for Payment In Lieu Of Tax, Amazon has also committed to fund
community infrastructure and to donate space “for a tech startup
incubator and for use by artists and industrial businesses” as well as
for a newly built public school. “I’ll change my name to Amazon Cuomo if
that’s what it takes,” Andrew Cuomo, the Democratic governor, said
during the bidding process. After the announcement, Mayor Bill de
Blasio, a progressive Democrat whom one might expect to have gripes with
Amazon’s brand of peeing-in-a-bottle capitalism, declared Amazon’s move “a giant step on our path to building an economy in New York City that leaves no one behind.”
New York’s leaders were not alone in their enthusiasm for Amazon. Some 238 entities—cities,
states, two dozen different towns in Massachusetts, and a cluster of
three businesswomen in Anchorage, Alaska—sent proposals to host Amazon’s
second headquarters. Many of the bidders are understood to have shared
proprietary data about their areas and plans, in addition to dangling
tax incentives. “A key concept for understanding how Amazon operates is
leverage,” Lina Khan, an academic fellow at Columbia Law School who has
written extensively about Amazon, told me. “By running the search as a
nationwide competition and receiving proposals from hundreds of cities,
Amazon now has a database of information that gives it a further
competitive advantage over rivals, as it’ll use this research to inform
future expansion, and Amazon extracted the best deal through exercising
its bargaining power over cities. The end outcome was to further enhance
its dominance.”
It was the game-show quality of this bidding, the
spectre of cash-starved governments begging to give money to a
billionaire, that left some critics fuming. Richard Florida, the
urban-studies theorist, told me that Amazon’s HQ2 competition “captures
the zeitgeist of early 21st century American late capitalism.” He added,
“The very idea that a trillion-dollar company run by the world’s
richest man could run an American Idol auction on more
than two hundred thirty cities across the United States (and Canada and
Mexico) to extract data on sites and on incentives, and pick up a handy
three billion dollars of taxpayer money in the process, is a sad
statement of extreme corporate power in our time.”
Even as many of
New York’s leading Democrats congratulated Amazon—and
themselves—Alexandria Ocasio-Cortez, the representative-elect of New
York’s Fourteenth Congressional District, which spans parts of the Bronx
and Queens, criticized the deal on Twitter. “The idea that [Amazon]
will receive hundreds of millions of dollars in tax breaks at a time
when our subway is crumbling and our communities need MORE investment,
not less, is extremely concerning to residents here,” she wrote. If
American politics weren’t already confusing enough, her statement caused
the conservative National Review to run a headline
that supported the view of a Democratic Socialist: “Alexandria
Ocasio-Cortez Is Right about Amazon’s Corporate Welfare.”
Reached
by telephone on Thursday, Ocasio-Cortez called the Amazon deal
“dressed-up trickle-down economics.” “What we’re seeing here is a
complete public cost for a private corporate benefit,” she told me.
“When you give a three-billion-dollar tax break to the richest company
in the world, that means that you’re giving up our schools. You’re
giving up our infrastructure. You’re giving up our community
development.” In other words, there is an opportunity cost to luring the
world’s richest man by letting him free-ride on the public services
that other New Yorkers must pay for—whether it’s the failing subway
system, the troubled and segregated school system, or, as Ocasio-Cortez
noted, critical renovations at
public-housing complexes like Queensbridge, the largest in the United
States, which will soon be down the street from Amazon’s New York
headquarters. Last year, Ocasio-Cortez said, residents there “went
without heat and hot water in the dead of winter.” Residents have
experienced similar outages this year.
One could argue that
critics of the deal are being unfair. New York State and New York City
have every reason to anticipate that the deal will put them in the
black—netting them more revenue from Amazon than they are foregoing in
tax breaks and grants. Although, for a company in the publishing and
media businesses, New York has some allure beyond tax breaks, and a
tougher set of demands still might have caused Amazon to walk away. As
Cuomo said in a press conference, extending a tax break “costs us
nothing, nada, niente.” But losing a guaranteed job creator to a state
like Texas or Florida, where Amazon would have paid little to no income
tax, would have cost the city dearly. Which is fair enough. But the
larger question is: Why should it be this way? Why should states engage
in races to the bottom and effectively penalize existing businesses
whose only sin is having been in the state for a longer period of time?

There
is also the particular question of why Bezos, of all people, needs to
play this way. After the announcement, David Heinemeier Hansson, the
founder of the software firm Basecamp, published an open letter to
Bezos, who is one of his investors. “It doesn’t have to be like this,”
he wrote. “If you tilt your perspective a little, I think you’ll be able
to catch the optics that the richest man in the world asking for
tribute like this is an ugly one.” He urged Bezos to consider shaping
his legacy “into something more than the man who killed retail,
extracted the greatest loot from its HQ cities, and who expanded the
most monopoly holdings the fastest.”
What makes Bezos’s approach
especially confounding is that it occurs at the precise moment that he
is reinventing himself as a philanthropist. He and his wife announced
earlier this fall that they will start by donating two billion dollars
toward the education of poor children and the care of the homeless. It
is a noble impulse, and it generates good press, but it also raises a
more general question about American life today. Why do we tolerate,
even celebrate, the particular arc of hyper-capitalism that Amazon
represents? Build a company from the ground up. Do whatever it takes to
survive and grow, regardless of the consequences for your customers and
workers. Consolidate a monopoly if you can, first in one arena, then in
multiple. Use that power, that leverage, to exact concessions from
governments, so that you pay even fewer taxes and grow even faster, even
bigger. And then, with the wealth that was accumulated by underpaying
workers, by avoiding taxes, by lobbying against regulations, by amassing
uncompetitive levels of market power—then, with that wealth, you give
back. You make a difference. You become a philanthropist, a lover of
mankind. You salve by philanthropic moonlight the wounds you may have
cut by operational daylight. You solve the very problems you have helped
to cause.

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